[Report] UK Commercial General Insurance Market Research, Trends, Analysis TOC

CHAPTER 1 INTRODUCTION
- What is this report about?
- Who is the target reader?
- How to use this report
CHAPTER 2 COMPETITIVE DYNAMICS
- Introduction
- Merger and acquisition interest among insurers was muted in 2006, but three new start-up underwriting agencies entered the market
  - M&A activity was muted among insurers, though failed bids and speculation show insurers' continued interest
  - A few deals were made in 2006 involving Lloyd' s insurers
  - Acquisition activity has been more common among brokers
  - Three new start-up underwriting agencies entered the commercial insurance market in 2006, targeting the SME sector
    - Start-up ABC Insurance was bought by Liverpool Victoria
    - M4 Underwriting started writing business in June 2006 backed by Allianz
    - Start-up Arista Insurance will also target the SME market
- A continued focus on cost reductions led to job cuts and offshoring in 2006
  - 2006 saw a number of high profile UK job cuts as insurers continued to move jobs abroad
  - Brokers are also showing interest in offshoring
- The top 10 commercial insurers control almost 70 per cent of the market
  - The three largest commercial insurers RSA, Norwich Union and Zurich all have substantial property, commercial motor and liability accounts
    - Royal & SunAlliance has large motor, property and liability accounts, and saw growth in Risk Solutions and marine in 2005, amongst other areas
    - Norwich Union also has large property, motor and liability accounts and focuses on small and mid-sized businesses
    - Zurich' s largest line was liability, which was hit by strong competition
  - AXA and Allianz emphasize the strong competition in commercial lines, but saw growth in selected areas
    - AXA experienced decreases in liability, but saw growth in group health
    - Allianz also found liability challenging
  - New Hampshire, BUPA and NFU Mutual are specialist commercial lines insurers
    - New Hampshire focuses on liability insurance
    - BUPA is exclusively a health insurer
    - NFU writes only liability and motor insurance in commercial lines
  - ACE and QBE were number eight and ten in the ranking of UK commercial insurers in 2005
    - ACE was ranked 8th among commercial insurers in 2005 and focuses almost exclusively on liability insurance in the UK
    - QBE is the 10th largest UK commercial insurer and focuses on commercial motor and liability insurance
- Among commercial insurers ranked 11-20 some insurers are growing quickly, suggesting that they may one day threaten the position of the top 10
- For most of the top 10 commercial insurers commercial business is the most important line
  - The commercial book dominates for all but one of the top 10 insurers that focus on both commercial and personal lines
  - Two of the top 10 commercial lines have no personal book to speak of
  - Norwich Union is the only insurer among the top 10 for which personal lines dominates
- Profitability declined in the accident and health market, driven by increases in loss ratios in particular
  - Changes in FSA reporting categories have affected accident and health ratio comparisons
  - Many accident and health insurers saw loss ratios increase in 2005, but a clear divide is emerging between PMI and accident insurance specialists
    - Norwich Union, BCWA and Legal & General all recorded double digit loss ratio growth
    - Stonebridge, SimplyHealth and Fortis achieved impressive loss ratio reductions
  - Expense ratios rose by 3.0 per cent in 2005, with accident specialists driving this increase
    - While PMI providers succeeded in reducing their expense ratios, accident and travel insurance specialists more often suffered an increase
    - PMI providers BUPA and WPA had the best expense ratios in 2005
    - Norwich Union, Legal & General and New Hampshire achieved the best expense ratio reductions
    - BCWA and Stonebridge recorded large expense ratio increases
  - The combined ratio of the top A&H providers rose by 5.3 per cent in 2005, with the majority of PMI and accident providers contributing to this performance
    - The companies with the best ratio metrics were from the accident and travel sectors, not the PMI market
    - New Hampshire, Fortis and SimplyHealth all made impressive combined ratio improvements in 2005
    - BCWA had a terrible year in 2005, however GEFI, Clinicare and Groupama all suffered big combined ratio increases as well
- Liability insurers recorded improvements in profitability in 2005, as many insurers combined premium income growth with a reduction in combined ratio
  - Changes in FSA reporting categories have affected liability ratio comparisons
  - Over half of the top 20 liability insurers increased their premium income in 2005, with the majority also experiencing reductions in loss ratio
    - Many companies combined increases in premium income with improvements in loss ratio
    - Only three liability insurers saw an increase in loss ratio in 2005
    - The largest liability insurers generally have loss ratios of around 60 per cent, while smaller insurers have more varied loss ratios
  - The majority of liability insurers saw increases in their expense ratios in 2005
    - XL and Catlin saw the highest increases in expense ratios in 2005, while many other insurers saw smaller increases
    - However, a few insurers bucked this trend and managed to reduce their expense ratio
  - Over half of the top 20 liability insurers improved their profitability in 2005, athough reporting has had an impact on these figures
    - Of the top 20 liability insurers 13 returned combined ratios below 100 per cent in 2005
    - Some companies, however, still suffer from unprofitable liability books
- Soft market conditions led to both falling premiums and reductions in profitability for many of the top 20 motor insurers
  - The loss ratio of the top 20 motor insurers increased in 2005 and soft market conditions were evident as many companies suffered declining premium income
    - Many insurers saw worsening loss ratios and reductions in income, suggesting that some have accepted reduced premiums
    - Three companies saw a decline in premium income but improved loss ratio
    - Six companies managed to improve their loss ratios while growing their motor books
    - First Alternative was the only top 20 company that combined an increase in premium income with a growing loss ratio
  - The expense ratio of the top 20 motor insurers saw a small deterioration in 2005
    - Only a few insurers saw substantial changes to their expense ratios in 2005
  - Soft market conditions led many insurers with a combined ratio already over 100 per cent to suffer further reductions in profitability
    - 11 of the top 20 motor insurers failed to return an underwriting profit in 2005
    - Many companies combined increasing unprofitability with falling premium income, suggesting that some players have cut their premiums to maintain market share
    - 11 of the top 20 returned an underwriting loss and seven of these further increased their combined ratios in 2005
    - Nine companies recorded underwriting profits in 2005, with five of these seeing improvements on their 2004 results
    - Several players have dealt well with the soft cycle so far and are set to continue riding the cycle in the future
- Pecuniary loss is a profitable line with an average combined ratio below 100 per cent however, high expense ratios are a problem for a sub-group of insurer
  - Changes in FSA reporting categories have affected pecuniary loss ratio comparisons
  - In general the loss ratio for pecuniary loss is lower than other lines
  - The influence of the expense ratio or the loss ratio on pecuniary loss insurers' profitability varies depending on their main line of business
    - Insurers that mainly write personal creditor business have low loss ratios and high expense ratios
    - Insurers that specialize in commercial pecuniary loss generally have low expense ratios
    - The remainder of the top 20, with expense ratios around 40-60 per cent, underwrite a variety of pecuniary loss lines
  - Just over half of the top 20 pecuniary loss insurers recorded underwriting profits in 2005, making it a profitable business overall
    - Pecuniary loss is a profitable business for many insurers
    - However, a group of companies struggled to secure a profit
- Property insurance operating conditions improved slightly in 2005, although many players saw their combined ratios increase
  - The loss ratio of the top 20 property insurers improved in 2005
    - Nine of the top 20 actually recorded an increase in loss ratio, with significant increases from several players
    - Ecclesiastical, Direct Line and Allianz all recorded large loss ratio increases
    - St. Andrew' s and Norwich Union all achieved big reductions in loss ratio, going against the market trend of rising claims costs
    - Liverpool Victoria' s loss ratio was the worst of the property sector' s top 20 players
  - The expense ratio of the top 20 property insurers increased by 1.8 percentage points in 2005
    - Direct writers and mutual insurance companies had the best expense ratios
    - CIS, Royal & SunAlliance and Zurich all saw significant increases in expense ratios
    - Lloyds TSB and NIG achieved large reductions in their expense ratios
  - The combined ratio of the top 20 property insurers fell marginally by 0.4 per cent in 2005, driven by the performance of just under half of this peer group
    - 11 of the top 20 property insurers recorded an increase in combined ratio
    - Reflecting softer market conditions, Legal & General moved into an underwriting loss
    - Direct Line, Allianz and Ecclesiastical saw the biggest increase in combined ratio
    - Lloyds TSB, St. Andrew' s and Norwich Union all achieved double digit figure combined ratio reductions
CHAPTER 3 APPENDIX
- Methodology
  - Competitor data
    - GWP versus GEP reporting
    - Major changes in FSA Return categories and their impact
    - Total personal and total commercial business
    - Home-Foreign, overseas and facultative reinsurance business
  - Market size
    - Changes in market size information
- 2005 definitions for lines of business
  - Accident & health
    - Medical expenses
    - HealthCare cash plan
    - Travel
    - Personal accident or sickness
  - Motor
    - Total private motor
    - Total commercial motor
    - Private motor comprehensive
    - Private motor non-comprehensive
    - Motorcycle
    - Fleets
    - Commercial vehicles (non-fleet)
  - Property
    - Total commercial property
    - Household and domestic all risks.
    - Consequential loss (i.e. business interruption)
  - Financial/Pecuniary loss business
    - Total personal financial loss business
    - Total commercial financial loss business
    - Legal expenses
    - Fidelity and contract guarantee
  - Liability business
    - Employers liability (including the employers liability part of mixed liability packages but excluding mixed commercial packages)
    - Professional indemnity (including directors' and officers' liability and errors and omissions liability)
    - Public and products liability
    - Mixed commercial package
  - Total personal
  - Total commercial
- Pre-2005 definitions for lines of business
  - Accident and health
    - Individual accident and health
    - Group accident and health
  - General liability
  - Motor
  - Pecuniary loss
    - Total pecuniary loss figures
  - Property
- Ratio analysis by competitor
- Premium income measures
  - Earned premiums
  - Gross Premium
  - Net Premium
  - Written premiums
- Current readings
- Future readings
- Do you need more information?
- SPP writing team
- List of Tables
  - Table 1: Top 10 commercial competitors by GWP and market share, 2005
  - Table 2: GWP of selected fast growing commercial insurance players ranked 11-20
  - Table 3: Split between commercial and personal business for the top 10 commercial insurers, 2005
  - Table 4: Premium income compared to loss ratio, top 20 A&H insurers, 2004-5
  - Table 5: Expense ratio of the top 20 A&H insurers, 2004-5
  - Table 6: Premium income compared to combined ratio, top 20 A&H insurers, 2004-5
  - Table 7: Loss ratio compared to premium income for the top 20 liability insurers, 2004-5
  - Table 8: Expense ratio compared to premium income for the top 20 liability insurers, 2004-5
  - Table 9: Combined ratio compared to premium income for the top 20 liability insurers, 2004-5
  - Table 10: Loss ratio compared to premium income for the top 20 motor insurers, 2004-5
  - Table 11: Expense ratio compared to premium income for the top 20 motor insurers, 2004-5
  - Table 12: Premium income compared to combined ratio for the top 20 motor insurers, 2004-5
  - Table 13: Loss and expense ratios compared to GWP for the top 20 pecuniary loss insurers, 2005
  - Table 14: Combined ratio compared to GWP for the top 20 pecuniary loss insurers, 2005
  - Table 15: Premium income compared to loss ratio, top 20 property insurers, 2004-5
  - Table 16: Expense ratio of the top 20 property insurers, 2004-5
  - Table 17: Premium income compared to combined ratio, top 20 property insurers, 2004-5
- List of Figures
  - Figure 1: The top 10 commercial insurers together accounted for 68.2 per cent of the market in 2005
  - Figure 2: There are some fast growing commercial insurers in the group ranked 11-20
  - Figure 3: Commercial business was more important than personal business for most of the top 10 commercial insurers in 2005
  - Figure 4: Many PMI players in the accident and health sector recorded an increase in their loss ratio
  - Figure 5: Expense ratio changes varied in the accident and health sector in 2005, but many PMI providers' ratios deteriorated slightly
  - Figure 6: Most liability insurers achieved improvements in loss ratio in 2005 and many also saw their premium income grow
  - Figure 7: The majority of the top 20 liability insurers saw increases in their expense ratios in 2005
  - Figure 8: The majority of liability insurers improved their combined ratios in 2005
  - Figure 9: Softening market conditions clearly affected the loss ratio of the top motor insurers
  - Figure 10: Most motor insurers saw only relatively small changes to their expense ratios in 2005
  - Figure 11: The four largest motor insurers have combined ratios below the top 20 average
  - Figure 12: Pecuniary loss insurers generally have low loss ratios, but expense ratios vary by line of business
  - Figure 13: On average property insurers increased premium income in 2005, but also saw their loss ratios rise
  - Figure 14: With the exception of a few companies like Lloyds TSB, NIG and Ecclesiastical, most property insurance providers saw expense ratios rise in 2005

UK Commercial General Insurance 2006 - Competitive Dynamics

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